Phaseout for Child Tax Credit

[Lainyb]

Our 2020 AGI was $186k. We received the full $2k child care credit in 2020. Per the IRS, the max credit of $3,600 (age 5 and under) for 2021 is available for AGI of $150k or less for MFJ.

1. What is the phase-out calculation? I can’t find it anywhere. The letter from the IRS just says it phases out for higher income taxpayers but doesn’t give the cap or other info.
2. Given our AGI, why are we still receiving advance payments? I thought they would not give advance payments for AGI over $150k and have it all credited when filing 2021 taxes.
3. If our AGI is lower than $150k in 2021, will we get the remaining amount when we file 2021 taxes?

[LJane29]

Hi Lainyb

There are 2 phase out levels for the 2021 child tax credit.  The "added" credit does phase out at a lower level (that's the $150k one) but the "original" child tax credit keeps the old phase out of $400k for married filing joint. 

Here's our calculator to figure out how much advance you should get along with what your 2021 projected child tax credit is: https://turbotax.intuit.com/tax-tips/family/7-requirements-for-the-child-tax-credit/L3wpfbpwQ

1.  Phase out for additional amount is $50 of credit for every $1,000 of modified adjusted gross income over the $150K amount

2. You are still eligible for the original child tax credit

3. Yes, when you file your 2021 taxes it will reconcile if you qualify for more.

thank you

[Lainyb]

Thanks, looks like once your AGI hits $182k you don't receive any of the additional $1,600 child tax credit.

I used the calculator you shared a link for, and now have another 2020 question. When I entered my info, it showed that I was eligible for the $2,000 credit, but then showed another $1,400 "Maximum additional child tax credit", with the explanation stating "You could be eligible for the Additional Child Tax Credit up to this amount based on your specific circumstances as reported on your tax return. For example, your actual Child Tax Credit might be reduced due to other credits that are available to you. The Additional Child Tax Credit is a refundable credit meaning that you might receive this credit even if your tax return shows that your tax is $0."

I don't understand this additional credit and how one would qualify.

[LJane29]

That is another place where there is a big difference between 2020 child tax credit and 2021 child tax credit.  In 2020 if you had "excess" child tax credit (it could only lower your tax to $0) you had to meet certain other conditions (around income and number of dependents) to receive any of the "excess" as a refund.

For 2021, if you have any "excess" child tax credit there are no additional criteria to receive that as a refund.

You may not have qualified for the refundable part in 2020 but now, as long as the credit isn't used up to reduce tax, you can get the refundable portion.

[Lainyb]

Thanks. Where can I find information related to "certain other conditions (around income and number of dependents) to receive any of the "excess" as a refund." for 2020?

[LJane29]

Form 8812 Instructions go into the deep details,.  The additional amount for 2020 has to do with your income level.  Basic formula is that the amount allowed for refund is reduced by 15% of your income for income over $2,500.

So if your income was $52,500 the limit is 15% of $50,000 or $7,500 would be taken off any potential refundable amount.